Emerging Markets

This is just a question for thought, not a trade recommendation: Could the Emerging Markets Internet & Ecommerce ETF (EMQQ) be ready for a breakout?

It's quite rare to find a chart where price has consolidated and appears to be breaking out, and at the same time, the oscillators are ready to move up on both the higher and lower timeframes. This set up can lead to breakouts.

With that said, obviously, there are many headwinds. To name just a couple:

• The VIX is at its trend line (support) and could easily oscillate up soon, causing most risk assets to drop lower.
  
• This ETF is composed mainly of Chinese stocks which have been volatile and vulnerable to geopolitical events, not to mention Chinese and international stocks, in general, have typically underperformed the S&P 500 over the long term.
  

Traders are like surfers trying to catch waves. Sometimes the wave is a total dud. Sometimes the wave crests right when you get on. Almost always, waves crest while sub-currents on a lower degree are pulling back out. On some rare occasions, however, a large wave occurs because the currents on all levels converge and begin to swell roughly at the same time. This is happening right now to EMQQ. While the weekly oscillator appears to be the only noteworthy incongruent current, it is not in overbought territory, and there is no bearish divergence in the weekly RSI to warrant the possibility that a weekly oscillation down would have a strong downward bias. Additionally, there is a breakout on the weekly chart which, to some extent, undermines the effect of the oscillation down on that timeframe.

Only time will tell.

Comment:

As you see, despite having virtually all the technical indicators in your favor for a major breakout, the price suddenly dropped. This proves that no matter how good your charting you are always susceptible to random events, and therefore must always use stop losses to manage risks. In this case, the SEC placed many Chinese companies on a list facing delisting from the NYSE, including this ETF's largest holding, Alibaba, causing a sudden drop.